Asia-Pacific

China-Japan Rivalry Intensifies in Asia's New Growth Region

By Kalinga Seneviratne

SINGAPORE (IDN) – While China's Belt and Road Initiative (BRI) has been in the news for a while – thanks mainly to negative reporting by the western media – Japan is slowly funding the building of supplementary trade corridors in the Mekong region projecting itself as not only interested in building infrastructure, but also trade facilitation through human capacity building in the region.

With a growth rate exceeding 5 percent and a combined population of over 240 million, the Mekong region, which was devastated by the Vietnam war in the 1960s and 1970s, has now emerged as a new growth centre of Asia. With the exception of Thailand, the population of the region – that also includes Myanmar, Laos, Cambodia and Vietnam – is young, with more than 20 per cent of residents below 15 years of age.

In 2015, the combined total gross domestic product in the region amounted to US$673 billion, and the middle classes are growing right across the region.

Japan’s renewed interest in the region is fuelled by Japanese Prime Minster Shinzo Abe's enthusiasm for the U.S.-inspired 'Free and Open Indo-Pacific Strategy' which has also ropes in India and Australia. China views this as a strategy to contain Beijing's economic rise and increasing political clout in the region.

The Association of Southeast Asian Nations (ASEAN) whose membership includes all the Mekong countries plus five other regional nations, are also worried that the increasing rivalry between Asia's two major powers may side line the ASEAN-centrality strategy of the regional grouping with respect to development issues.

Under Japan's new initiative that has targeted mainly Cambodia, Myanmar and Vietnam, it is not only funding building of highways, railways and bridges, but also trade facilitation through the training of human capital for better flows of people and goods.

A major criticism of the BRI has been the emphasis on the building of infrastructure and the lack of attention given to building human resources in the countries concerned to benefit from greater connectivity. This has led to suspicions that China is building these trade routes for its own benefit and not to promote two-way trade.

"There is a notable contrast between China's and Japan's aid strategies in the region. China is focusing on supporting 'hard' infrastructure projects while Japan is keen to develop 'soft' infrastructure," noted Fumitaka Furuoka, a visiting senior research fellow at the Asia-Europe Institute of the University of Malaya, in a commentary published by the East Asia Forum.

However, during the ASEAN Foreign Minister's meeting in Singapore in August 2018, it was emphasized that the 'Indo-Pacific' strategy should respect 'Asean-centrality' in building the regional economic architecture. During the same meeting, Chinese Foreign Minister Wang Yi said that China would welcome the Japanese initiative for security and economic cooperation in the region, but warned that it needs more funding than what Japan is offering.

The Japanese government has pledged US$ 110 billion, under a White Paper on Official Development Assistance (ODA) for the Asia-Pacific region released in February 2018, that would be channelled towards certain 'high-quality' infrastructure projects in Asia. The Chinese government, over the last few years, has pledged some US$4 trillion for numerous infrastructure projects in developing countries (spanning the Central Asian region and Africa as well), that has the potential to make Asia the centre of the global economy.

When China announced its grand Silk Rout revival initiative (later renamed BRI) a few years ago, Japan expressed scepticism. But in May 2017, Abe sent a special envoy to the BRI forum in Beijing. And at the Hamburg G20 summit in July 2017, Chinese President Xi Jinping and Abe met and discussed Japan’s interest in collaborating with China in implementing the BRI.

While perceived disputes in the South China Sea have grabbed the attention of the international media, there is a greater conflict brewing up along the Mekong river, where China has formed its own Lancang-Mekong Cooperation (LMC) organization that includes all five countries bordering the Mekong River plus China.

At the 2016 LMC summit, China pledged US$ 10 billion in preferential loans and another US$ 10 billion in credit for the five countries to develop the region. It has triggered some 132 development projects in the region, but that includes building dams along the river that has upset Vietnam which is downstream.

China has already built 7 mega dams and 20 are under construction or are being planned. But, recent flooding in Laos, due to the bursting of a dam has raised concerns about the efficacy of such development schemes. In 2016, China was forced to open the gates of a major dam on the Mekong as a goodwill gesture, when Vietnamese farmers suffering from a major drought complained about lack of sufficient water flows from the Mekong.

"It is impossible to discuss the LMC without putting it into the context of the BRI. The Mekong sub-region represents a key area for the BRI," argues Nguyen Khac Giang, lead political researcher at the Vietnam National University in Hanoi.

He points out that the so-called 'signature projects' of the LMC, such as the Kunming-Bangkok road, China-Laos railway and Long Jiang Industrial Park (in Vietnam), are in the BRI framework, and most of the financial resources for LMC projects will come from China, either through the LMC special fund or the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund.

"The link with China's 'initiative of the 21st century' indicates that the LMC is part of a bigger bid by Beijing to seek a leadership role in the region, notes Giang.

In the 1970s Japan was credited with having helped the development of Southeast Asian region with its strategic investments in establishing industrial parks in the region, where Japanese companies set up manufacturing plants to make use of cheap labour in the region.

China began its investment in Southeast Asia much later and started committing funds for infrastructure development in the region beginning in early 2000s, when Yunnan province and the Guangxi Autonomous Region prioritised inter-regional transport connectivity with Southeast Asian countries. China’s initiatives for building infrastructure connectivity in Southeast Asia gained momentum in 2013 when President Xi Jinping proposed the BRI.

"In the colonial past, the Mekong region was divided between two rival powers – Great Britain and France," notes Furuoka. "With recent developments, the Mekong countries may want to work out an astute and ingenious diplomatic policy in order to counteract potentially contradicting interests in the region."

"Otherwise, the Mekong countries could once again find themselves becoming a 'playground' for rivalling big powers in Asia," he warns. [IDN-InDepthNews – 02 October 2018]

Photo: The 11th Mekong-Japan Ministerial Meeting on August 2-3, 2018 in Singapore, with Taro Kono, Minister for Foreign Affairs of Japan serving as chair. Attendees included: Sok Siphana, Advisor to the Royal Government of Cambodia; Saleumxay Kommasith, Minister of Foreign Affairs of Laos; Kyaw Tin, Minister for International Cooperation of Myanmar; Don Pramudwinai, Minister of Foreign Affairs of the Kingdom of Thailand; and Pham Binh Minh, Deputy Prime Minister and Minister of Foreign Affairs of Viet Nam. Credit: Ministry of Foreign Affairs of Thailand.

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